India's Special Economic Zones Bring Rags and Riches ; India's New Public Policy Trend Is Enriching Some Farmers and Booting Others off Their Ancestral Lands

Omkar Sharma knows that halfway across India, villagers like
himself have sparked rioting in the countryside. Enraged by a
government plan to buy farmland for private industry, they have
destroyed bridges and blockaded roads outside Calcutta in clashes
that have left several people dead.

Yet here, west of Delhi, where Mr. Sharma once worked the parched
plains and a large global industry is also gobbling up acres of
farmland, there is only quiet contentment. Until a few months back,
Sharma's family of 12 had only a broken-down tractor to its name.

Now, after selling their land to one of India's largest
companies, every member wants to buy a car - preferably an SUV.

Indians have greeted the country's most controversial economic
reform, the Special Economic Zone (SEZ), from two contrary
perspectives. Established a year ago as a cure for India's
industrial woes - an ueberindustrial park offering up-to-date
infrastructure and tax breaks - the zones have been hailed as
economic saviors and denounced as thinly veiled land grabs.

The scene in Pahisaur is evidence that the zones can work,
supporters say. But the mounting, sometimes violent, agitation among
farmers outside Calcutta is creating momentum for reform.

With 200 zones already approved and hundreds more in the
pipeline, economists acknowledge that the process is spiraling
beyond its original intent. Moreover, the upheaval from West Bengal
to Maharashtra in the east is a reminder that despite India's rising
economic profile internationally, it remains a nation of poor
farmers who are uneasy about the country's transition away from an
agrarian past.

"A right balance has to be struck," says D.K. Joshi, an economist
at the Indian credit-ratings firm CRISIL.

The balance, so far, has tilted in favor of developers, say
critics. When India borrowed the SEZ concept from China last summer,
it hoped to stir activity in its lagging industrial sector, offering
companies "islands of excellence" amid India's pitted roads,
unpredictable electricity supply, and punishing tax laws.

The response has surged beyond expectation. In the 27 years since
China began its SEZ policy, it has established five such sites. In
little more than a year, the state of Maharashtra alone already has
approved more than two dozen.

What's more, many of the approvals have been less about industry
and more about real estate speculation. According to his figures,
only 25 percent of the SEZ approvals have gone toward industrial
zones, with the rest for real estate, says Shameem Faizee, secretary
of the Communist Party of India.

"It needs to be reversed," he says. The concern is that the zones
are taking prime agricultural land and displacing farmers who have
worked their land for generations. …

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